press release
High Court sees steep rise in professional negligence claims
9 December 2010
Specialist insurance law firm Browne Jacobson fears a steep rise
in insurance premiums in 2011 after the number of professional
negligence claims more than doubled in twelve months.
According to the latest figures from the High Court the total
number of claims rose from 147 in 2008 to 339 in 2009. Claims
against accountants rose from 0 in 2008 to 28 in 2009, claims
against surveyors and estate agents from 1 to 17 and against
solicitors from 80 to 210, more than any other type of claim. In
addition the number of claims against other professionals rose from
66 to 84, an increase of more than 25%.
Jim Hobsley, an expert in professional indemnity (PI) claims at
Browne Jacobson LLP, commented:
“The economic conditions mean that all professionals, in
particular solicitors, have found themselves first in the firing
line when disgruntled clients are looking for someone to sue. The
duties owed by solicitors are particularly onerous so they are a
preferred target. As a result of the shrinking of the property
market and, in particular, the buy-to-let market since 2007, a
large proportion of the claims lodged in the High Court are likely
to have been by lenders against solicitors engaged in conveyancing
matters.”
According to Hobsley the recession in the 1990s caused a
hardening of the PI market and he predicts further hardship for
professional advisers if the upward trend in professional indemnity
(PI) claims continues. PI insurance premiums rose to an all-time
high this year and are now around 25% higher than last year. In
October the Solicitors Regulation Authority (SRA) announced that
418 firms had applied to enter the Assigned Risks Pool (ARP) which
provides cover for high-risk firms. This compares to less than 30
firms three years ago.
Hobsley added: “The number of claims against professionals has
increased every year since 2006 and we expect the trend to
continue. We have already seen insurers reducing the number of
solicitors on their books whilst others have pulled out of the
solicitors’ professional indemnity insurance market all together.
If these trends continue, premiums will undoubtedly increase and we
may see many more firms simply shutting up shop. Some solicitors
and smaller practices will seek to merge in order to achieve
economies of scale, but their potential liability for claims may
follow them into the merged practice creating potential pitfalls
for their new colleagues. Effective and demonstrable risk
management is the best way to reduce both premiums and claims.”
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